Recovery for Pure economic loss in English law, arising from negligence, has traditionally been

limited. Notably, recovery for losses that are "purely economic" arise for negligent misstatements, as
stated in Hedley Byrne v. Heller. Economic loss generally refers to financial detriment that can be
seen on a balance sheet but not physically. Economic loss is then divided into "consequential
economic loss" - that which arises directly from some physical damage or injury (e.g. loss of
earnings from having your arm cut off) and "pure economic loss", which is everything else.
The fear behind allowing claims for "pure economic loss" is that potentially unlimited claims could
flood in. In this essay, we will be looking at duty of care for pure economic loss and negligent

misstatement. It is important to make sure for us to understand the law in this area and policy
that drives it.

As accountants and auditors, we are likely to have a contractual relationship with our clients
that affords them protection if we give negligent advice. However, other people such as
shareholders who may also rely on our work have no contractual relationship with us and case
law has developed over the years that determines what duty of care is owed to them. This
assignment discusses the law on pure economic loss, which is loss that arises due to a negligent
misstatement. This is an area of commercial and professional importance where there has been a
trend towards expansion in the area of negligent misstatement.
In practice there is no difference between liability arising from negligent misstatement and liability arising from
negligent acts. A party can suffer damage by reliance on incorrect advice just as he can be injured by any other
negligent conduct. The law has imposed that it is essential to establish a duty of care bring a claim.
With respect to a negligent misstatement however, the consequences of this could be far-reaching and affect
countless people. Because of this the law had been reluctant to impose a duty of care in the making of statements.
This situation changed in 1964 when the landmark case Hedley Byrne set out marked a new approach to the law of
negligent misstatement. With reference to the decision above and decided cases, this

assignment will critically examine the legal principles and concept of pure economic
loss arising from negligent misstatement.

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